BANCO PRODUCTS – “The Leader in Auto Engine Gaskets”

Banco Products India Ltd. was incorporated in March 16, 1961 and is a leading manufacturer and supplier of Original Equipment for commercial vehicles and passenger vehicles. They supply high quality engine cooling products and engine sealing gaskets to the automotive industry. Their products include radiators, intercoolers, oil coolers and all types of engine gaskets. They are the largest exporter of radiators to Europe and have a growing presence in North America, Middle Eastern/ African and South American Markets.

Banco Products is one of the Multibagger stocks identified by Dynamic Levels Research based on technical and fundamental research.Banco Products share price has touched a 52 week high of Rs. 241.65 on 06-Sep-2016 and a 52 week low of Rs. 90.20 on 25-Feb-2016, and is currently trading at Rs.212.

Share HoldingThe promoters holding in the company stood at 67.89% & Institutions and Non-Institutions hold 4.49% and 27.61% respectively.

Financial AnalysisQuarterly ResultsDuring the quarter ended 30th June 2016, the total income from operations of Banco Products reported a growth of 32.07% on Q-o-Q basis and stood at Rs. 385.75 crore against Rs.292.08 crore for the quarter ended 31st March 2016.The operating profit of Banco Products for the quarter ended 30th June 2016 stood at Rs.45.33 crore against Rs.25.07 crore for the quarter ended 31st March 2016, growing by 81%.PAT also grew by 88% and stood at Rs.40.65 crore for the quarter ended 30th June 2016 against Rs. 21.57 crore for the quarter ended 31st March 2016.EPS grew by 88% and stood at Rs. 5.68 for Q1FY17 against Re.3.02 for the quarter ended 31st March 2016.

Annual Result Analysis:The net sales of Banco Products for FY16 stood at Rs.1187.87 crore compared to Rs.1111.55 crore in FY15, marking a growth of 6.87%The operating profit stood at Rs. 111.66 crore in FY16 against Rs.64.08 crore in FY15, marking a growth of 74%PAT stood at Rs. 89.89 crore in FY16 against Rs. 87.65 crore in FY15. PAT for the year was grew by 2.56%EPS also grew by 2.53% and stood at Rs. 12.57 for FY16 against Rs.12.26 for FY15

Investment Rationale

• Banco has proven reputation of being a reliable partner supplier to develop reliable and critical cooling solutions for diverse OEM customers.
• The company has upgraded its R&D facilities to take on more complex and challenging projects to develop cooling modules which will enable its clients to manufacture engines, vehicles which will meet future emission and fuel efficiency standards so that they stay competitive.
• Banco Brand is the most respected Product brand in the aftermarket
• Indian Auto Component Industry is expected to grow at a CAGR of 11% through 2021
• The company has an impressive list of OEM customers like Yamaha, Bajaj Auto, Honda, TVS Motors, Maruti Suzuki, Hero Honda, Tata Motors. JCB to name a few.
• The company’s ability to design and manufacture compact cooling modules for vehicles meeting BS4 and higher emission standards have helped the company in acquiring a large share of business from existing customer base as well as from new customers.
• The company is focusing on increasing its OEM customer count and product approvals which will benefit the company when the overall economy will demand picks up.

At CMP Rs. 212 the Banco Products share price is trading at a P/E of 14.96 and Banco Products has a market cap of Rs. 1533.36 crore. We recommend a buy on the stock at CMP with a price target of Rs. 240 for a short term outlook.

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